“IPOs Boost Demand for Silicon Valley Mansions” – Bloomberg
“US Housing Crisis Is Now Worse Than Great Depression” – CNBC
These two headlines from Tuesday’s financial press describe well the dichotomy in America’s two-speed economy. Corporate profits have never been better but employment has rarely been worse. The housing market in Silicon Valley is benefiting from the unique (capital market) successes of a specialized group of workers but so many more neighborhoods across the country are mired in foreclosures, underwater mortgages, and declining prices.
Here are some key quotes revealing the good and the ugly:
“The median price of single-family houses sold in Palo Alto…climbed 20 percent in May from a year earlier to $1.63 million, the biggest jump since 2008…In Mountain View…prices rose 3.1 percent to $957,500, the ninth year-over-year gain in 12 months…
…The real estate gains in the valley, located primarily in the San Jose metropolitan area, are mostly occurring in towns where million-dollar values are already the norm. The median price in Cupertino gained 12 percent last month from May 2010 to $1.08 million, and values in Saratoga rose 4.7 percent to $1.62 million…”
“Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.”
Ironically enough, housing is amazingly affordable in relative terms:
“The rate for a 30-year conventional mortgage is around 4.5 percent, just above the historic low of 4.2 percent in October 2010. The ratio measuring mortgage costs to renting is 7 percent below its norm, while the price-to-income ratio is 23 percent below its average.”
If only there were some catalyst to get people into these cheap homes…Anyone for a swig of QE3?
Be careful out there!
Full disclosure: no positions